Buffalo Bills quarterback Josh Allen runs for a touchdown against the Cincinnati Bengals in Orchard Park, N.Y., last Sunday.Jeffrey T. Barnes/The Associated Press
Personal finance is a funny thing. On the one hand, the fundamentals are always the same: Spend less than you make, invest in a diversified portfolio to build long-term wealth and so on. If you’re a long-time reader of this newsletter you know them well.
On the other hand, the financial obstacles and traps people face are constantly evolving. In a recent episode of The Globe’s Stress Test podcast, personal finance editor Roma Luciw and I took a close look at a growing hazard: online sports betting.
App-based gambling has exploded in Ontario since Canada legalized single-event sports betting in 2021 and the province went all-in by allowing private sports-betting apps the following year. Last year alone, Ontarians placed bets worth around $11-billion. (So far, no other Canadian jurisdiction allows private operators to take bets directly from players.)
Still, online gambling has become alarmingly common nationwide, particularly among young adults. A recent report found that about a third of Canadians between the ages of 18 to 29 bet online and that online gambling is more harmful than traditional forms of gambling.
Betting is now something you can do on your phone – from anywhere, with a few thumb strokes. For many, it’s become a routine part of watching a game with family and friends.
Even when sports betting doesn’t lead to problem gambling, it’s become one more place where young people, who face a tough enough financial start as it is, can lose money, financial planner Shannon Lee Simmons told us on Stress Test.
Worse, a sports-betting habit also makes it harder for some of Lee Simmons’s youngest clients to grasp the difference between gambling and investing to build long-term wealth, she said.
The process of placing a bet or buying a stock on your phone is strikingly similar, Lee Simmons noted.
The psychology of gambling is also akin to that of speculative stock trading, Perry Wright and Hans Frech, two behavioural researchers at the Common Cents Lab at Duke University, told us.
“Both of them rely on uncertain outcomes, both deliver that hit of excitement when things go your way and both can trigger learning patterns driven by brain chemistry that keep us coming back for more and more,” Wright said.
And while that has always been the case, technology is now blurring the line even more, with betting and trading apps that are both designed to keep users engaged and make it as easy as possible to spend money, Frech said.
And for sports wagers as well as daring stock trades there are social media forums, memes and videos where people can compare themselves with peers and influencers.
The boring old idea of buying and holding a well-diversified portfolio with low fees is tough sell to a crowd used to the thrills of flipping stocks, Lee Simmons said.
To get her clients excited, she uses charts that show how returns compound for someone with an investment horizon of 30, 40 or even 50 years.
And for very young people – think, older teens who’ve acquired a taste for risky stocks – her advice is to put some funds in a long-term nest egg while keeping some money for thrilling trades.
“Let them crash and burn with an amount that’s reasonable,” she said. Over time, they’ll see for themselves which one is the sensible approach to investing.
You can listen to the full episode of Stress Test here, or wherever you find your podcasts. If you have thoughts about this episode or ideas for a future one, you can reach me ealini@globeandmail.com
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New products that caught my eye
I’m eager to see what’s coming for the PC Financial program under its new owner, EQ Bank. As a long time PC Financial Mastercard holder and EQ Bank customer, I will report back. Feel free to send me your own feedback and observations.
